India's National Infrastructure Bank Faces Starting Troubles

The National Bank for Financing Infrastructure Development, which is India's latest attempt at setting up a development finance institution, is facing teething troubles. The institution is yet to make key management appointments, partly due to a high entry barrier, but also due to bureaucratic delays, a person with direct knowledge of the matter said.

The hiring process for a managing director and three deputy MDs at NaBFID has been in the works since earlier this year. The government had tasked the Banks Board Bureau with the hiring process. The deadline for submitting applications for the MD position ended on March 25, while that for the three DMD positions ended on April 22.

The problem with the hiring process is two-pronged, the person quoted above said, speaking on condition of anonymity.

First, the criteria set by the NaBFID board is stringent. According to the conditions laid down by the board, applicants must have a certain kind of experience.

They must have worked with institutions with assets worth more than Rs 3 lakh crore, as of March 31, 2021. MD applicants must not be older than 60 years, while those applying for the DMD roles must be under 59 years old.

According to the person quoted above, most banks in India have not indulged in active infrastructure financing over the last decade. The public sector experts in infrastructure financing are too old to be eligible, while most such officials in the private sector would not be eligible owing to the Rs 3 lakh crore criteria, he said.

While the age criteria cannot be eased, the BBB had advised the NaBFID board to reconsider the Rs 3 lakh crore criteria. However, the decision was not reversed, the person said.

“As far as the board positions, the application deadline is over, the process is underway at the BBB. There are no further comments in this regard,” Kishore Kumar Poludasu, officer on special duty at NaBFID, said in an email response to BQ Prime.

A second problem coming in the way of appointment stems from the BBB itself.

Terms of a majority of members of Banks Board Bureau expired last month. While the government had given a two-year extension to the BBB members in 2020, it has since not provided any further extensions. The government is yet to appoint fresh board members either, pending which, activities at the institution are on hold, the person quoted above said.

Another plan to create a separate institution, along the lines of BBB, is also in the works, this person said. The new institution will be responsible for hiring at all of the state-owned financial sector companies, such as non-bank lenders, insurance companies, asset managers etc.

With the hiring process delayed, the NaBFID may take a little longer than planned to take off.

At an event organised by the Indian Construction Equipment Manufacturers' Association in March, NaBFID Chairman KV Kamath had said that the organisation would be operationalised in the first quarter of FY23.

While delivering her budget speech in February 2021, Union Finance Minister Nirmala Sitharaman had announced that the government will set up a development finance institution with a capital base of Rs 20,000 crore. The institution is expected to have a lending book of at least Rs 5 lakh crore and will lend to nationally critical infrastructure projects.